Acquisition Term Sheet Template for Indonesia

An Acquisition Term Sheet serves as your roadmap for structuring mergers and acquisitions in Indonesia, providing a framework for negotiations before committing to binding agreements. This preliminary document outlines the essential commercial and legal terms that will govern your transaction, helping parties align expectations and identify potential deal-breakers early in the process.

When do you need this document?

You'll need an Acquisition Term Sheet when initiating serious M&A discussions in Indonesia, particularly for transactions involving significant value or complex structures. This document becomes crucial when foreign investors seek to acquire Indonesian companies, as it must address foreign ownership limitations under Presidential Regulation No. 44 of 2016. Indonesian companies pursuing domestic acquisitions also benefit from term sheets to establish clear negotiation parameters, especially when dealing with family-owned businesses or companies with multiple shareholders. The document is particularly valuable in competitive bidding situations where sellers want to compare offers systematically, and when transactions involve earn-out provisions, management retention, or regulatory approvals that require careful structuring.

Key legal considerations

Your term sheet must carefully balance non-binding commercial terms with binding legal obligations such as confidentiality and exclusivity provisions. Purchase price mechanisms require particular attention, including working capital adjustments, debt assumptions, and potential earn-out structures that comply with Indonesian accounting standards. You should address due diligence scope and timeline, ensuring adequate time for regulatory compliance reviews and financial audits. Material adverse change clauses need careful drafting to account for Indonesia's economic volatility and regulatory changes. Consider including provisions for regulatory approvals from OJK for financial services companies or KPPU for transactions meeting competition law thresholds, as failure to obtain these approvals can derail your transaction.

Legal requirements in Indonesia

Indonesian law requires compliance with multiple regulatory frameworks depending on your transaction structure and target company sector. Under Law No. 40 of 2007, share acquisitions must follow specific procedures for board and shareholder approvals, while asset acquisitions may trigger different compliance requirements. Foreign investors must verify compliance with the Negative Investment List and obtain necessary investment approvals from BKPM (now OSS system). Financial services acquisitions require OJK approval, while transactions exceeding specific thresholds need KPPU clearance under Law No. 5 of 1999. Your term sheet should specify which party bears responsibility for obtaining regulatory approvals and establish clear timelines. Consider including provisions for Indonesian law governing clauses and dispute resolution mechanisms, as foreign arbitration clauses may face enforceability challenges in certain circumstances.